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Sallie Mae and Gallup just released the results of their third annual
survey of how American families pay for college. The survey found that
families perceived college costs as increasing by more than 17%
compared with last year. As a result, families are becoming more cost
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conscious in their college choices.
Family estimates of the total cost of attendance increased 17% from
$15,931 in 2008-09 to $18,659 in 2009-10. The amounts families said
they paid to cover all college costs increased even further, from
$19,432 in 2008-09 to $24,097 in 2009-10, a 24% increase.
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This college cost data is self-reported and reflects family
perceptions of college costs. Actual increases in the cost of
attendance are much lower as measured by the College Board (4.4% to
7.3%) and the tuition inflation component of the Consumer Price Index
(6.0%). But it is the family perceptions of college costs that
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influence their behavior.
Almost three-quarters of the survey sample attended public colleges,
which may partly explain the dramatic increase in perceived college
costs. College tuition rates in California increased by 32% this year,
with double digit increases also in Arizona, Florida and a handful of
other states. Public college tuition rates are likely to experience
double digit increases again next year, when the stimulus bill funding
runs out. State income tax revenues have not recovered enough to
replace the stimulus bill funding, and state support of higher
education is one of the first budget areas cut by the state
legislature. When state funding decreases, public colleges are forced
to raise tuition to compensate.
Lenders have also tightened credit criteria for the types of
non-federal debt often used to finance a college education, such as
private student loans and home equity loans and lines of credit. This
may have forced more families to pay for college from savings, making
them feel as though the college costs have increased
dramatically. Spending from income and savings has a more direct
impact on the family budget than borrowing. The Sallie Mae survey
found that the greatest increase in spending was from parent income
and savings, with a particularly dramatic increase in spending from
college savings plans.
Families have also reported taking a variety of cost-saving steps to
meet college costs, such as reducing spending (73%), increasing work
hours and earnings (48%), having the student live at home (43%), using
tax credits and deductions (43%), accelerating education to finish
quicker (30%) and choosing a less expensive college (23%).
The percentage choosing a less expensive college was much lower this
year (23%) as compared with last year (48%).
99% of families took at least one cost-saving measure and 78% took two
There were significant racial differences in the types of cost-saving
measures utilized. Minorities were more likely to live at home, with
64% of Hispanic students, 58% of African-American students and 36% of
White students choosing this option. They were also more likely to
choose a less expensive college, with 35% of Hispanic students and 33%
of African-American students compared with 19% of White students.
Hispanic students were more likely to enroll part-time (32%), compared
with 22% of African-American students and 11% of White students.
African-American students were less likely to work more or increase
their earnings (40%), compared with 52% of Hispanic students and 50%
of White students.
The sources of money used to pay for college costs include parent
income and savings (37%), grants and scholarships (23%), student
borrowing (14%), parent borrowing (10%), student income and
savings (9%) and friends and relatives (7%).
The increase in college costs has caused a significant increase in the
number of families who are worried about further increases in tuition,
from 35% in 2008-09 to 49% in 2009-10. 38% are worried that student
loan interest rates will increase, compared with 22% the year before.
34% are worried about scholarships and grants becoming less available.
33% are concerned about job loss, up from 23% last year, and 27% are
concerned about their child's ability to get a job, up from 18% last
year. Concerns about decreases in the value of savings and
investments are virtually unchanged at 33% in 2009-10 and 31% in
2008-09. But 31% are concerned about decreased availability of student
loan funding. These results confirm the findings of a previous
college decision impact survey
by Fastweb and Maguire Associates.